BlackRock, State Street, and Vanguard block action on deforestation in shareholder votes, finds Friends of the Earth

Deforestation

The world’s three largest asset managers, BlackRock, Vanguard, and State Street, have either voted against or abstained from voting on all efforts to halt deforestation by shareholders of consumer brands and agribusiness companies since 2012, a new report from environmental advocacy group Friends of the Earth finds.

The ‘Big Three’ asset managers own a total of USD10.6 billion in bonds and shares of suppliers and traders in the commodities that drive deforestation, including soy, palm oil, cattle, and paper, according to the report ‘Doubling Down on Deforestation’.

These firms supply to consumer goods companies, in which the trio hold another USD698 billion in bonds and shares.

Deforestation continues to accelerate, with an area of global tree cover the size of the United Kingdom cleared every year between 2014 and 2018, resulting in carbon emissions equal to the yearly emissions from the European Union.

This coincides with the worst burning season the Brazilian Amazon has seen in a decade, with over 500 major fires so far in 2020, only a year after deadly fires in Indonesia pumped at least 708 million tons of carbon dioxide into the atmosphere.

Friends of the Earth’s report highlights 16 resolutions brought by shareholders in companies including Domino’s Pizza, Kraft Heinz, and KFC’s operator Yum! Brands, going back to 2012, with Vanguard voting against every single one.

BlackRock voted against all, except for one resolution of shareholders in Mondelez in 2012, when it abstained. Meanwhile, State Street has abstained from voting seven times, but opposed all other efforts.

“Millions of Americans rely on BlackRock, State Street and Vanguard to provide a secure future, but by continuing to neglect the global deforestation crisis while bankrolling the industries responsible, these investors are actively undermining that very future,” says Jeff Conant, senior international forest program director with Friends of the Earth.

“The destruction of forests is also tied to the epidemic of killings of environmental defenders, many of them Indigenous, and the world’s largest investors have stayed silent. This is not just inaction – it is wilful neglect.”

A spokesperson at Vanguard, which owns USD291 billion in assets tied to consumer goods companies, responds to the report’s findings: “At Vanguard, we take our responsibility as stewards of our customers’ assets extremely seriously… Proxy voting and our voting record, while important, does not reflect the full extent of our actions on issues such as this.”

The asset manager draws attention to its investment stewardship team, which engages with the executives and boards of companies in the agribusiness sector, including discussion on deforestation and its risks to long-term business sustainability. “If a company does not make progress towards addressing such risks, we will hold them accountable to promote and protect long-term value for our investors,” says the spokesperson.

BlackRock has not commented on the report’s headline findings, but its annual stewardship report shows that it voted against 93.7 per cent, or 104 of the 111 environmental resolutions brought by shareholders in its companies in the last year.

“As a long-term shareholder, we evaluate each situation on a case-by-case basis to make informed voting decisions that are aligned with the economic interests of our clients,” writes the asset manager in its stewardship report.

BlackRock cites 1,200 engagements it has made with companies on environmental topics this year, on topics including climate risk management and deforestation. In particular, it engaged with five Brazil-based agribusiness companies including meat giants JBS, Marfrig, and BRF, on eliminating deforestation. One of the companies has since blocked over 400 farms related to illegal deforestation in Brazil.

State Street Group has not provided any comment on the deforestation report, but says it follows a “carrot and stick” approach when voting on such issues.

“Often, we give companies that pledge to make change the time they need to implement the change but then hold them accountable if they don’t follow through. This was the case when one financial services company fell well below our expectations to disclose key workforce diversity data. In year one we voted to abstain on the proposal but supported it in the following year, when disclosure didn’t improve.”

Following the publication of its deforestation report, Friends of the Earth delivered more than 125,000 petitions to the investors’ headquarters in Boston, New York, Philadelphia and San Francisco.

New York City Comptroller Scott M Stringer, who oversees the New York City’s USD194.5 billion pension system, says: “If we don’t act now to preserve and protect our world’s forest, we will exacerbate an ongoing environmental and human rights crisis. Global deforestation rates have accelerated by 43 per cent since 2014 and we need every company, from consumer retailers to financial firms, to realise we can’t stand by as forests are razed and burned.”

“For years the Big Three ignored deforestation, sending a clear signal to industry that the destruction can continue,” said Mary Cerulli, co-founder of Climate Finance Action, a Boston-based group advocating for the finance sector to transition justly away from business models that drive the climate crisis.